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HARRISBURG - The Pennsylvania Liquor Control Board is one of the largest purchasers of wine and liquor in the world, and a local warehouse is one of three places where inventory is stored before it reaches state liquor store shelves.

Nearly 16 million cases of wine and liquor were shipped from three distribution warehouses to the state stores, according to the LCB's newly released report for fiscal 2012-13. The cases held bottles of the roughly 3,500 wine and spirit products purchased by the state monopoly from domestic and foreign companies. If the cases were lined up, they would stretch more than 4,000 miles from Harrisburg to Berlin, Germany.

Kane Warehouse Inc. in Scranton is one of the key cogs in this system. The other two warehouses are in Philadelphia and Pittsburgh.

Kane, which has a long-standing LCB contract to store liquor inventory at its warehouse, was paid $11.2 million by the LCB in fiscal 2012-13. The LCB recently made an important change to its computer-tracked warehouse inventory, a development officials said is designed to better meet customer demand at the stores.

Companies that sell liquor and wine to the LCB like Diageo, a British-based liquor supplier, now retain ownership of that liquor while it's stored at the warehouse. The LCB takes ownership of the inventory when it ships from the warehouse, a departure from past practice where the agency owned the liquor while in the warehouse.

The new arrangement benefits the LCB and the liquor companies and that should help the customer, said John Metzger, LCB director of supply chain.

By retaining inventory ownership, the companies have the ability to ensure high in-stock levels in the state stores, which ultimately equates to sales, he added. The LCB forecasts specific product sales 13 weeks in advance and companies can now see that data and plan accordingly to make sure they have the product available in the warehouse. In the past, companies didn't see the forecasts.

This matters because the LCB is one of the largest purchasers of their product. The companies are not charged for warehouse storage.

The LCB benefits from not having so much capital tied up in inventory - $100 million was freed during the first half of 2012, according to the report. As a result, the LCB was able to pay back a $100 million revolving loan from the state Treasury.

Kane gets a handling fee for each case of liquor, which includes the storage and shipment to state stores throughout Northeast and Central Pennsylvania. The more cases that move through the warehouse, the better it is financially for the firm, officials said.

The goal of the distribution system is to get the right product to the right store at the right time so customer needs are satisfied, LCB officials say. This is especially important during November and December, the holiday retail period that is as busy for the state stores as any private merchandiser.

"That's a customer service issue for us," said LCB spokeswoman Stacy Kriedeman. "It's something we take very seriously."

In the long-running debate over privatizing the state liquor system, the future of the LCB distribution system is one of the issues being addressed. An LCB privatization bill approved by House lawmakers earlier this year provides for a privately owned retail and distribution system.

Contact the writer: rswift@timesshamrock.com

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